The ring-fencing idea was proposed last September by the Independent Commission on Banking, a government-appointed panel of experts. Ring-fenced banks must hold more loss-absorbing debt – 17 per cent of risk-weighted assets, the white paper proposes. Overseas operations will be exempt if resolvable without risk to UK taxpayers. However, additional loss absorbing capacity may be required of firms if resolvability concerns persist.
There have been concerns as to exactly how large, integrated banking groups with a mix of retail, private banking and other functions will be affected by this legislation. At recent conferences, this publication was told that the impact is not expected to be significant.